I had to laugh out loud when, after Democrats lost control of the Senate and Barbara Milkulski lost her chair of appropriations committee said with such remorse------

NOW THOSE REPUBLICANS ARE GOING TO END ALL NEW DEAL PROGRAMS.

Mikulski's district is Baltimore Maryland and Baltimore ended New Deal programs decades ago! Corporations suck Baltimore's revenue like a vampire squid and pay no taxes.

As I stated yesterday the coming economic crash will pull the same trillions of dollars in taxpayer bailouts to Wall Street and the rich investment firms. Bill Gross and PIMCO will be the next AIG and its CEO and no doubt PIMCO is in the process of spinning off all of its assets into investment firms like HighStar as AIG did just before the last crash. You can bet the US Ivy League universities that were the major shareholders in the AIG asset spinoff are in line to capture all of the wealth PIMCO generated selling pension investments knowing he was imploding the bond market. Don't worry about Gross losing his wealth by Rule of Law bringing back fraudulent gains---as with the AIG CEO----not a single indictment.

So, both shareholders and taxpayers will be bailing out this global MUNI-FUND corporation. THAT'S THE WAY YOUR CLINTON NEO-LIBERAL AND BUSH NEO-CON POLITICIANS WANT IT! ALL MARYLAND POLS ARE WALL STREET GLOBAL CORPORATE POLS! GET RID OF THEM.

Today I want to look at the R & D credit and the expensing tax credit for corporations given as a gift by Obama and Congressional neo-liberals.

As you see below, Obama super-sized the wealth of the rich in 2010 using a manufactured Congressional fight as a ploy for compromise. Remember, by 2010 Obama and his US Justice Department had already told us THEY SEE NO CORPORATE FRAUD as the entire world was victim of tens of trillions of dollars in corporate fraud. That was Obama's gift to Wall Street as well. Make no mistake---had we elected Hillary she would have done the same as they are both Clinton Wall Street global corporate neo-liberals. As this article shows---it not only gave breaks in income and capital gains----it eliminated what is a huge corporate tax revenue -----R & D and property taxation for corporations. How did this pass with a Democratic President and Senate? It wouldn't have had they been progressive labor and justice!'But Obama wants to create billions in new tax breaks for businesses that make no sense at all--such as making the R&D credit permanent (just a tax break for R&D that businesses have to do to stay viable) or providing 100% expensing (just a tax break, and likely to result in purchases of equipment from overseas, thus shipping jobs out of the country rather than helping jobs domestically)'. We already knew that extending the Bush tax cuts would send a trillion dollars to the rich----but what most people don't know is how is ended yet another corporate tax revenue stream at a time of huge national debt and the move toward austerity against the American people.Imagine how many of the rich sent their estates into trusts for absolutely nothing during this two year window----the loses of estate tax revenue was huge. The Founding Fathers included the Estate Tax as the great equalizer----keeping America from becoming what it is today----an oligarchy of wealth disparity. Lucky for the American people much of this wealth disparity was created by corporate fraud so recovering the fraud redistributes the wealth back to the people.

ataxingmatterSeptember 13, 2010

Estate tax and extension of Bush cuts generally

According to an interview with Treasury's Michael Mundaca reported in the Wall St. J. today (Sept. 13, 2010), Congress and the Obama administration are discussing a possible bill to allow estates that pass in 2010 to have the 2009 or the 2010 law apply. See Martin Vaughn, Estate Tax Choice May Be In Works For 2010 -- Treasury Official, Wall St. J..

Does that make sense? Probably not. The problem exists because the gimmick was adopted by the GOP to pretend that the cost of all their tax changes wasn't as big as it actually would be if the changes were permanent reforms rather than temporary. Allowing an election doesn't make sense, but neither did the original Bush tax cuts, that provided a gradual phasing out of the estate tax over the years of the Bush regime with a complete repeal for one year in 2010 and then a resurrection of the 2001 laws in 2011. But how Congress deals with that sunsetting gimmick now will determine a great deal about the economy in the future.

Regretably, politicians hear the loud ranting from the tea partiers and others, and so, as the New York Times reported on Saturday, in an article by David Kocieniewski, Tax Cuts May Prove Better for Politicians Than for Economy, NYTimes, Sept. 11, 2010.

Obama at least knows that passing a new tax cut for the wealthiest 2% makes very little sense--they will save it or invest it overseas; they are unlikely to spend it on consumer goods that create new production demand in the economy or use it to create new, entrepreneurial businesses that hire people. But Obama wants to create billions in new tax breaks for businesses that make no sense at all--such as making the R&D credit permanent (just a tax break for R&D that businesses have to do to stay viable) or providing 100% expensing (just a tax break, and likely to result in purchases of equipment from overseas, thus shipping jobs out of the country rather than helping jobs domestically).

Meanwhile, the Republicans generally haven't ever seen a tax cut they didn't like (unless it is one targeted at the lowest-income Americans). They make ridiculous claims such as the one that not providing an extension of the Bush tax cuts for the wealthiest Americans will stifle small businesses and hurt job creation. Ridiculous, because very very few Americans who receive income from small businesses will be much impacted by letting the tax cuts for the wealthiest Americans lapse as currently set by law (only 2% of small business owners receive more than $250,000 of income from their business) and those with small business income aren't really encouraged to plow it back into the business by cutting their income taxes. See, e.g., William Gale, Five Myths About the Bush Tax Cuts, Washington Post, July 30, 2010 (hat tip Linda Galler for reminding me about this article).

The Times article reports on the CBO's analysis of short-term effects of policy decisions, which concluded that (to quote the Times' description) "extending the tax cuts would be the least effective way to spur the economy and reduce unemployment" while tax cuts for the rich "would have the smallest 'bang for the buck' because wealthy Americans were more likely to save their money than spend it." The CBO had more support for payroll tax relief, since those cuts in taxes would got to the people who are most likely to spend it in ways that stimulate the domestic economy. The problem I see with payroll tax cuts is not who they are targeted to benefit but the result that can be misused by the right-wingers who want to decimate Social Security and Medicare--a payroll tax cut results in less money going into those coffers, which just feeds the ridiculous notion that the payroll tax programs are nearing bankruptcy. No sense in giving the entitlement-haters more ammunition. Better would be a pre-bate of income tax amounts, including a negative income tax refund to those who won't pay any income tax but will pay payroll taxes.

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When you hear about the corporate R & D tax credit you may think----well, that helps the economy. Think who gets the bulk of these credits? The US oil industry writes off hundreds of billions in tax subsidy through this law. Only the richest corporations conduct their own R & D and the tax deductions from this credit comes from wages, supplies, and maintenance of facilities that are the very operational costs of doing business. So, this tax credit never brought value to the American people----all of the money saved was spent overseas and it will be for the near future. When we see memes that show the hundreds of billions cut from Food Stamps versus the hundreds of billions in tax subsidy to US oil corporations----THIS IS THE CREDIT THAT BRINGS THIS SUBSIDY.

Obama and Congressional neo-liberals are a tag -team for corporate tax cuts and subsidies at a time when we have a $17 trillion national debt and an equal amount of corporate fraud needing to come back----FDR used a 70% corporate tax rate to do that------Clinton neo-liberals are cutting corporate taxes to zero.

REMEMBER, OBAMA IS NOT FORCED TO DO THIS----REDUCING CORPORATE TAX REVENUE AT A TIME OF SUCH NATIONAL DEBT AND A COMING ECONOMIC CRASH----A RECIPE FOR FISCAL DISASTER---FOR THE AMERICAN PEOPLE.R&D credits: Tax savings value for 2014 and beyond

June 6, 2014

Robert W. Henry, CPAWeaver

Recent news further illustrates the value oil and gas companies may realize from claiming research and development (R&D) tax credits at the federal and state levels. Extension of the federal R&D tax credit for the 2014 and 2015 tax years was approved by the Democrat-led U.S. Senate Finance Committee in April 2014. Additionally, the Republican-led House of Representatives approved a bill in May 2014 that would make the R&D credit permanent. The House measure passed with a vote of 274 – 131. The House bill still requires full Senate approval and President Obama’s signature, but it remains clear that the R&D tax credit enjoys widespread political support. This bipartisan support for the R&D credit in general makes it more likely than ever (since the credit’s most recent expiration at 12/31/13) that its proposed extension will become law in either temporary or permanent form at some point in the foreseeable future. The R&D tax credit was originally enacted as part of the Economic Recovery Tax Act of 1981, and has been extended for virtually every year since.Effective January 1, 2014, oil and gas companies may also claim an R&D tax credit in Texas. With that move, Texas joins other significant energy-producing states in offering an R&D tax credit. Oil and gas companies operating in the industry’s upstream sector may undertake activities that qualify for the R&D tax credit when experimentation is used to overcome the uncertainty regarding recoverability of resource reserves. Activities to identify a petroleum or gas reservoir’s existence typically do not qualify for the credit. Many costs incurred in maximizing return on capital for recovery of known reserves, though, may qualify for the credit. Various midstream and downstream activities, such as determining methods of more efficiently transporting or refining oil and gas, may likewise qualify for the credit. U.S. Internal Revenue Code (IRC) sections 174 and 41 provide primary guidance for defining qualifying R&D activities.Federal direction for defining R&D activity US Treasury regulations section 1.174.2 (Regs. §1.174.2) defines qualifying research and experimental expenditures. A qualifying activity must:

Relate to the development or improvement of a “product,” inclusive of a technique, invention, formula or process; and;

Address uncertainty regarding the appropriate method or design for the product.

An eligible §174 activity may also qualify for the R&D credit under Internal Revenue Code section 41 (§41), if the activity:

Is technological in nature (i.e. based in engineering, geology or other hard science).

Contains a sufficient degree of development uncertainty.

Consists primarily of a process of experimentation.

Has a permitted purpose that improves a business component, which may be a product, process, software, technique, formula or invention.

Internal Use Software (IUS) may also meet the §41(d) qualified research definition if:

The software is innovative.

The software development involves significant economic risk (i.e. possible changes to anticipated return on investment is at risk due to developmental uncertainty), and;

The software is not available for commercial use.

Individual companies and industry vendors rely upon analytics and other software tools. An oil and gas company may develop its own software, which may qualify for the R&D credit. A vendor may likewise develop software that is not marketed as a separate product. Once a company has determined an activity meets R&D qualifications, it needs to determine that credit’s worth.Calculation methods for the R&D tax credit The Traditional Credit Method or the Alternative Simplified Credit (ASC) Method may be used to calculate the R&D tax credit’s value.The Traditional Credit Method provides a credit equal to 20% of the excess of qualified research expenses (QRE) for the current tax year over a statutorily prescribed base period amount. The ASC Method uses a base amount equal to 50% of the average annual qualified research expenditures claimed by a company for the three immediately preceding tax years. The excess of current year QREs over that base is then multiplied by 14% to determine the credit. Special rules also apply for first-time credit claims and start-ups.Available state R&D credits Various energy-producing states offer R&D tax credits. Texas is now offering a sales and use tax exemption or a franchise tax credit related to qualified R&D activities. With the volume of industry activity taking place within the state’s Barnett Shale, Eagle Ford and Permian Basin areas as well as other locales, companies have considerable incentive to investigate the Texas R&D tax credit. Colorado also hosts a thriving energy industry and offers a 3% R&D tax credit. Qualifying activities must take place within designated enterprise zones. Louisiana offers up to a 40% R&D tax credit for qualifying activities. North Dakota bases eligibility for its R&D tax credit on §41 criteria. The percentages for the credit vary, based on the particular tax year(s) for which the credit is being claimed.State tax codes vary immensely and not all states with a substantial oil and gas industry presence offer an R&D tax credit. An oil and gas company needs to determine where it has state tax nexus and identify whether an R&D tax credit is available for that state. After determining that activities may qualify for R&D tax credits at the federal or state levels, a company needs to ensure that internal processes exist for capturing those tax credits.Steps for capturing R&D tax benefitsCapitalizing upon potential R&D tax credit benefits begins with examining what company projects or functions have qualifying activities. An upstream oil and gas company needs to examine how it maximizes return on investment regarding known reservoirs and how it extracts oil or natural gas, based on criteria defined by §1.174.2 and §41.Such examination needs to consider analytics and intellectual property as well as equipment and physical processes.A midstream sector pipeline company may have devised means to more efficiently monitor oil and natural gas flows or may have overcome adverse field conditions in placing a pipeline. Various processes for purifying or refining oil or natural gas may have been improved upon, thereby giving a downstream sector company a substantial business benefit. Industry vendors likewise need to evaluate what internal projects and functions might include qualifying R&D activity. When R&D activities are identified, a company needs to determine how such costs are tracked. How are labor expenses tracked for internal employees? What about contractor and vendor expenses? What supplies or materials are used, and how are those costs recorded?Such awareness enables a company to define what it can claim for an R&D tax credit. Applying the tax credit formula then takes into account a company’s historical QRE and gross receipts. Individuals responsible for R&D activities should be interviewed. Those individuals can describe exactly what activities are taking place, what steps and processes are involved, and what costs are being incurred. Those interviews also help individuals gain awareness of how R&D activities may be defined and what activities need to be documented. Conducting such internal analysis can be an expansive task. If necessary, company managers should consult with a tax advisor for assistance in both identifying and tracking R&D activity.Potential tax return examination concerns If a company’s R&D tax credit claims are examined and audited, several factors will be considered. The first is the nexus between costs and activities. A company needs to demonstrate that costs factored into the R&D credit claim are indeed relevant and incurred in direct relation to the attributed R&D activity. The process of experimentation, which defines R&D activity, must be documented. That documentation must demonstrate the activities undertaken in the development initiative must consist of a process of experimentation. A process of experimentation is any process that has the capability of measuring the effectiveness of more than one proposed design alternative related to the uncertainty being investigated. The company must also be able to identify the business component being developed or improved, which can be a product, process, software, technique, formula or invention held for sale in use of the taxpayer’s trade or business. While many state tax codes are based upon federal tax code, differences arise among tax jurisdictions. State tax credit criteria must also be evaluated to identify potential examination concerns.The R&D tax credit supports long-term business aims Oil and gas companies face considerable risks. Capitalizing upon potential business opportunities requires considerable capital investment, too. R&D activities are necessary to mitigate risks and to make capital investments as worthwhile as possible. The R&D credit enables companies to realize substantial tax benefits from those activities. Companies must be aware of where such opportunities may exist, and what conditions must be met to meet requirements defined in §1.174.2 and §41. Supporting documentation must be compiled, too. While that requires ongoing attention, the immediate and long-term tax savings make that effort worthwhile.

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The excuse Republicans and Clinton neo-liberals use for lowering corporate taxes while having a $17 trillion national debt is that US corporations have the highest tax rate in the world and cannot be competitive. THAT IS A LIE. THE AMOUNT OF CORPORATE TAX CREDIT AND SUBSIDY IN THE US HAS US CORPORATIONS THE LOWEST IN THE DEVELOPED WORLD. Add to that trillions of dollars in corporate fraud and US corporations have moved taxation to the profit side of the accounting ledger!

Below you see the list of many of the topics on taxes I will address.Keep in mind-----progressives do not mind help with business taxes for small and regional businesses----unfortunately most of the corporate tax laws do not apply to these domestic businesses we want to support. Graduated Corporate Income looks to be one. At the same time global corporations are disguising themselves are local by creating individual incorporations all over the US and with that comes this graduated corporate income tax break that they really shouldn't have.

STOP ALLOWING GLOBAL AND NATIONAL CORPORATIONS USE THIS INCORPORATION LOOPHOLE TO AVOID PAYING TAXES.

Call me crazy but I do not believe US corporations only had $470 billion in foreign income. One Wall Street bank probably does that much business in Asia in one quarter for goodness sake. So, this designation of double-taxation as an excuse to receive these breaks on foreign income is bogus.

'What Did Corporations Pay Abroad on Their Reported Foreign Income? On IRS Form 1118, U.S. companies report their foreign taxable income. The form also shows the amount of taxes they paid to foreign governments and breaks these numbers down by country and by industry. According to the most recent IRS data on Form 1118 (from tax year 2010), U.S. multinationals reported paying $128 billion in taxes on $470 billion in foreign taxable income. This represents an effective tax rate on foreign income of 27.2 percent'.

U.S. corporations — like many Americans — exploit every available rule in the tax code to minimize the taxes they pay. The United States has one of the highest corporate tax rates in the world, at 35 percent (not including any state levies), yet the actual amount in corporate taxes that the government collects (“the effective tax rate”) is lower than those of Germany, Canada, Japan and China, among others. The reason is confusingly called “tax expenditures,” a doublespeak term designed to legitimize special interest tax breaks and loopholes. Those ‘expenditures’ will cost the U.S. government $628.6 billion over the next five years, according to a 2010 report from the Tax Foundation. With advice from the Urban Institute’s Eric Toder, one of the country’s foremost authorities on corporate tax policy, we assembled the 10 most costly corporate tax loopholes and who benefits from them.10) Graduated Corporate IncomeThis policy places the first $50,000 of a corporation’s profit at a 15 percent tax rate, with higher profit levels garnering higher tax rates, until it tops out at 35 percent for taxable corporate income exceeding $335,000. The result is that an owner of a small corporation pays only 15 percent in taxes on the first $50,000 of profit, leaving more left over potentially for reinvestment and growth.5-yr Cost to Government (2011-2015): $16.4 billion Who benefits: Individuals that own small corporations.9) Inventory Property SalesForeign income of American companies is taxed in the country in which it is generated, and the U.S. gives a tax credit for that amount in order to avoid double taxation. Some companies have accumulated a glut of such tax credits (the “inventory”), and in order to use them up, they artificially boost foreign income through a “title passage rule” that allows companies to allocate 50 percent of income from U.S. production sold in another country as income generated by that foreign country (the “property sales”).5-yr Cost to Government: $16.7 billionWho benefits: Multinationals with operations in high-tax foreign countries.8) Research and Experimentation Tax CreditIntended to spur research and development within companies, in its simplest form this break allows for a 20 percent tax credit for “qualified research expenses.” There are more complex applications, as well. Detractors complain that it is paying corporations to do research they would have done anyway.5-yr Cost to Government: $29.8 billionWho benefits: Pharmaceutical companies, high tech companies, engineers, agriculture conglomerates.7) Deferred Taxes for Financial Firms on Certain Income Earned OverseasBecause most financial firms conduct their foreign operations as branches rather than as subsidiaries, as most companies in other industries do, they do not benefit from the tax breaks afforded to foreign subsidiaries. To compensate, this loophole enables financial firms to treat income from their foreign branches as if they were subsidiaries, along with all of the attendant tax benefits.5-yr Cost to Government: $29.9 billionWho benefits: Any financial firm with foreign operations.6) Alcohol Fuel CreditThis is a tax credit for the production of alcohol-based fuel, most commonly ethanol, which is made from corn. The credit ranges from $0.39 to $0.60 per gallon. In theory, the credit is meant to encourage alternative forms of energy to imported oil. It is largely responsible for propping up the price of corn, and is extremely popular in corn-producing states like Iowa and Illinois. 5-yr Cost to Government: $32 billionWho benefits: Food and agricultural conglomerates in the Midwest.

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I had to laugh out loud when, after Democrats lost control of the Senate and Barbara Milkulski lost her chair of appropriations committee said with such remorse------

NOW THOSE REPUBLICANS ARE GOING TO END ALL NEW DEAL PROGRAMS.

Mikulski's district is Baltimore Maryland and Baltimore ended New Deal programs decades ago! Corporations suck Baltimore's revenue like a vampire squid and pay no taxes.

FDR used the New Deal to redistribute wealth after the stock market crash that gave us the Great Depression. He created a set of corporate and wealth taxes to bring back what was a mirror of the 2008 economic crash also brought by massive and systemic corporate fraud. This New Deal tax program provided the American people justice by returning all of the wealth stolen in corporate fraud. This filled the Federal and state coffers with money that fueled the Great Work Programs. What better than to us money collected by taxes to recover corporate fraud to stimulate the US economy and create what was a first world nation with the finest in infrastructure. THAT WAS WHAT THE NEW DEAL AND HIGH CORPORATE AND WEALTH TAXATION WAS ABOUT.

Flash forward to today----after yet the same attack on the US economy by massive and systemic corporate fraud and sadly we have Clinton and Obama neo-liberals working with the Republicans to dismantle all of the FDR New Deal programs. Corporations today have moved taxes to the profit side of the accounting ledger. The corporate tax breaks that Obama and Congressional neo-liberals have been speaking about since 2009 'as job creators' is what Obama and Republicans will do over the next two years. Don't worry that the Senate changed hands this past election----the Senate was ready to do this in 2010 when we had control. Bernie Sanders is the only candidate for President that speaks against dismantling New Deal.

ByJeff HadenMoneyWatchDecember 7, 2011, 11:21 AM How would you feel about a 94% tax rate?

Today is the 70th anniversary of the bombing of Pearl Harbor. One day later the U.S. declared war on Japan, and four days later declared war on Germany and Italy. Declaring war was one thing, paying for the war another. World War II had massive worldwide consequences, but it also changed forever the way Americans -- and American businesses -- are taxed. I asked William T. Zumwalt, a CPA from Tulsa, Okla., to describe the impact of World War II on taxes, both then and now: If you think a 35% tax rate is high, try 94%. The consequences of the attack on Pearl Harbor still reverberate today, in dozens of unseen ways -- including how Americans pay the taxes that support the national security apparatus that works to prevent such an attack from happening again. The Roosevelt administration had been gearing up to support the war effort long before the actual attack. When bombers struck on December 7, 1941, taxes were already high by historical standards. There were a dizzying 32 different tax brackets, starting at 10% and topping out at 79% on incomes over $1 million, 80% on incomes over $2 million, and 81% on income over $5 million. In April 1942, just a few short months after the attack, President Roosevelt proposed a 100% top rate. At a time of "grave national danger," he argued, "no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year." (That's roughly $300,000 in today's dollars). Roosevelt never got his 100% rate. However, the Revenue Act of 1942 raised top rates to 88% on incomes over $200,000. By 1944, the bottom rate had more than doubled to 23%, and the top rate reached an all-time high of 94%. World War II also marked the introduction of payroll withholding, which has become the secret to making today's tax system work. Imagine the administrative and accounting nightmares faced by small business owners suddenly required to calculate and withhold taxes. Traditionally, the government had collected taxes in arrears when taxpayers actually filed their returns. But as the war accelerated, government couldn't wait for the new, higher taxes to increase revenue. That created a problem, though -- how could Americans afford to pay their 1942 taxes at the same time employers were withholding tax on 1943 income? To solve that problem, the Current Tax Payment Act of 1943 actually cancelled 75-100% of the lower of 1942 or 1943 individual tax liability. Tax rates remained high for decades following the war. It wasn't until President Reagan took office in 1981 that the top rate dropped below 70%.Today's top rate of 35% is actually low by historical standards -- and tax collections are at post-war lows as well.﻿﻿﻿﻿ We still face real threats to our security, but military spending, which reached 42% of Gross Domestic Product in 1942, has fallen to just 6% today -- even accounting for wars in Iraq and Afghanistan. The generation that fought the war is often called the "Greatest Generation." What would those who made such awesome sacrifices back then think of today's tax debates? Would they side with those who feel "taxed enough already" to support today's peacetime needs? Or would they side those who call for greater sacrifice from the wealthiest Americans?